| Key Central Bank rate | Current rate, % | Previous rate | Next meeting date |
| CBR | 16,00 | 16,00 | 27/07/2024 |
| ECB | 4,25 | 4,50 | 18/07/2024 |
| BOE | 5,25 | 5,00 | 01/08/2024 |
| FOMC | 5,50 | 5,50 | 31/07/2024 |
| o/n | o/n | o/n | 30 — Day Average | ||||
| RUONIA | 15,59% | MOSPRIME | 20,88% | ESTR | 3,6620% | SOFR | 5,3367400% |
USD. The week was short for the US market on the occasion of the American Independence Day celebration on July 4, but the traditional burst of volatility was noted on Friday July 5 on the publication of the labor market report.
The surge in activity was not in favor of the dollar. The labor market report was negative on all components, namely unemployment rose to 4.1% — the highest since November 2021, the number of employed in all agricultural sectors amounted to 206K (forecast 218K), and hourly wages increased by only 3.9% year-on-year (forecast 4.1%).
There are several conclusions. First, the signal to ease monetary policy is more than clear. A strong labor market did not give an opportunity to reduce the rate earlier, as it directly affected the growth of inflation. Now the probability of a rate cut in September is 75% versus 63% before the report was published.
The market reacted with a sharp decline in the US dollar across a broad spectrum. The dollar index IDX.USD stood at 104.5 after 105.6. The leading indices Nasdaq, DJ and S&P 500 ended the week in the green zone, adding 0.2-0.5% on average. Yields on 2-year and 10-year treasuries were 4.61% and 4.28%, respectively.
EUR. The euro closes the week near $1.0800. The beginning of the current week is marked by the announcement of the results of the first round of parliamentary elections in France. Despite the fact that the party of Marine Le Pen did not gain an absolute majority, the result was quite expected. The upcoming second round of voting on July 7 is crucial — the stability of the euro in the first days of the week depends on these events.
In terms of reporting, the week was successful for the euro — Manufacturing PMI for June 45.8 (forecast 45.6), Services PMI for June 52.8 (forecast 52.6), Producer Price Index (PPI) (y/y) (May) -4.2% (forecast -4.1%), Consumer Price Index (CPI) (y/y) (June) 2.5% as forecast, unemployment rate in May unchanged at 6.4%.
The momentum from the dollar’s decline on Friday’s labor market report sent the euro up to $1.0844. If the French election results do not bring shocks, the euro could occupy the $1.0750-1.0850 corridor.
Brent. Quotes of Brent crude oil significantly recovered their positions and by the end of trading on Friday amounted to $ 85.40 per barrel. This was primarily due to the weakening of the dollar, the growth in demand for fuel and amid tensions in the Middle East. In particular, the oil price increased by almost 2.2%. An additional factor in the price growth was the weekly decline in inventories and energy supply deficit in the U.S. in recent reporting periods.
According to the US Department of Energy, crude oil inventories decreased by -12.157 million barrels (forecast -0.400 million barrels) and gasoline inventories by -2.214 million barrels (forecast -1.500 million barrels) during the reporting week.
The commodity market retains the potential for growth and the nearest target is the resistance level of $89.85.
RUB. The Russian ruble keeps strengthening and ends the week at $87.40.
The financial market is discussing the prospects of the key rate and its possible increase by 1-2% at the upcoming meeting on July 26. At the financial congress of the Bank of Russia the possible effects of tight monetary policy were discussed. According to the regulator, these effects will become more noticeable in Q3 2024, which may lead to a slowdown in economic growth and a decline in inflation from peak levels. According to Rosstat, inflation was 9.13% as of July 1 compared to 8.57% as of June 24 on an annualized basis. The Bank of Russia also notes difficulties with cross-border payments, which leads to higher costs and more expensive imports.
The RF Ministry of Finance reported an increase in daily purchases of currency and gold from July 5 to August 6 to 5.4 billion rubles, up from 3.7 billion rubles a month earlier. In June, the deviation of actually received oil and gas revenues (OGD) from the expected ones amounted to Rub 21.5 bln, while in July the ministry plans to receive Rub 145.3 bln. Accordingly, the difference between these values will be used to purchase foreign currency in the National Wealth Fund.
Formation of the range of $87.00-89.50 is the most relevant in the current conditions of limited demand for currency.